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3 Things to Watch in the Stock Market This Week

By Demitri Kalogeropoulos - Dec 17, 2017 at 7:30AM

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Look for Winnebago, Nike, and FedEx stocks to make big moves over the next few trading days.

Stocks posted strong gains last week as investors reacted to positive earnings news and the increasing likelihood that Congress will pass a tax bill that includes significant corporate tax cuts. Both the Dow Jones Industrial Average (^DJI 2.68%) and the S&P 500 (^GSPC 3.06%) rose by more than 1 percentage point to add to hefty year-to-date gains.

^SPX Chart

^SPX data by YCharts.

Earnings reports set to publish over the coming days could produce big swings in Nike (NKE 4.55%), Winnebago (WGO 1.67%) and FedEx (FDX 7.16%) stocks. Here are the trends investors will be watching in these announcements. 

Nike's holiday forecast

Nike will post its fiscal second-quarter results after the market closes on Thursday. The footwear giant's shares are modestly outperforming the market this year after finishing 2016 dead last among the 30 members of the Dow. The rebound has been powered by growing optimism that Nike's sluggish operating trends are about to improve.

Some of that optimism is coming from retailers like Foot Locker, which last month announced surprisingly strong sales growth, while making positive comments on holiday-season trends. Nike added to the cheer, too, by predicting in late October that both its expansion pace and profitability level will rise over the next five years.

Executives might adjust that long-term vision on Thursday, but investors will likely be focused on Nike's reading of the latest demand and inventory trends, and whether they're supporting faster growth this holiday season.

FedEx's earnings growth

Package-delivery specialist FedEx announces its results on Tuesday afternoon. After trouncing expectations in the fiscal fourth quarter, the company struggled, as several challenges, including a cyberattack against its TNT Express segment and disruption from Hurricane Harvey, impacted last-quarter's operations.

A customer signs for a package delivery.

Image source: Getty Images.

Yet CEO Frederick Smith and his executive team still believe they can boost adjusted earnings at a double-digit rate for the full year, thanks, in part, to rising shipping rates. Looking further out, investors are hoping that FedEx's ramped-up network investments -- capital spending should be $5.9 billion this year compared to $5.1 billion in fiscal 2017 -- will start tapering off soon and allow for much stronger free cash flow. All those investments, meanwhile, should keep the package-delivery process running smoothly as shipping demand reaches its record peak over the next few days.

Winnebago's profit margin

There's a high bar set for Winnebago's fiscal first quarter report that's due out before the market opens on Wednesday. Shares have jumped almost 80% in 2017 as investors cheered the recreational-vehicle giant's sharply improving operating trends. Most of the good news is due to Winnebago's acquisition of the Grand Design brand, which has sent sales soaring this year, with revenue rising 59% over the past 12 months.

A Winnebago RV.

Image source: Winnebago.

That franchise's focus on high-margin towable RVs, meanwhile, is lifting overall profitability to new records. Gross margin expanded by over 4 full percentage points last quarter to help earnings spike 61%.

Look for Winnebago's top and bottom lines to continue benefiting from the Grand Design acquisition that has filled out its RV portfolio. Its financial priorities for the new fiscal year include paying down the hefty debt burden that came with this purchase. CEO Michael Happe and his team have to balance that important goal with continuing to invest in the business through the factory expansions and research and development work that keeps its RV products among the most popular choices in the industry.

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Stocks Mentioned

NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$112.91 (4.55%) $4.91
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,500.68 (2.68%) $823.32
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,911.74 (3.06%) $116.01
Winnebago Industries, Inc. Stock Quote
Winnebago Industries, Inc.
WGO
$51.27 (1.67%) $0.84
FedEx Corporation Stock Quote
FedEx Corporation
FDX
$243.24 (7.16%) $16.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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